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TMI Blog2019 (7) TMI 1535X X X X Extracts X X X X X X X X Extracts X X X X ..... al estate project, not only the debt has a commercial effect of borrowings and come within the scope of financial debt but also the petitioner comes within the definition of financial creditor - Therefore, petitioner being a financial creditor can invoke Corporate Insolvency Resolution Process under Section 7 of the code against the Respondent Corporate Debtor in case of default in repayment of financial debt. Whether Respondent Corporate Debtor has committed default in payment of the financial debt? - HELD THAT:- In the present case Financial debt is outstanding since the year 2017. The Corporate Debtor has not denied the claim of Petitioner and the amount of default exceeds much more than 1 lakh. In view of Section 4 of the Code, the moment default is Rupees one lakh or more, the petition to trigger Corporate Insolvency Resolution Process under the Code is maintainable. There is sufficient material on record to conclude that Respondent Corporate Debtor has committed default in repayment of the financial debt. The present application is complete and there has been a default in payment of the financial debt and that no disciplinary proceeding is pending against the propos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disciplinary proceedings are pending against him in Insolvency and Bankruptcy Board of India or elsewhere. In addition, further necessary disclosures have been made by Mr. Prabhjit Singh Soni as per the requirement of the IBBI Regulations. Accordingly, he satisfies the requirement of Section 7 (3) (b) of the Code. 4. It is the case of the Petitioner that he booked Flat No. 1005, 10th Floor, Block-B in the Corporate Debtor s project Gaur Sportswood , situated at Sports City Plot No. SC-01/E-1, Sector 79, Noida (the Flat ) pursuant to allotment letter dated 20 October 2015, along with terms and conditions (the Allotment Letter ), for a total cost of ₹ 1,22,51,000 to be paid in five instalments as per a construction linked payment plan. It is also asserted that in terms of the Allotment Letter, the Corporate Debtor had agreed to grant possession of the said Flat by 31 December 2016. 5. It is stated in the application that the Allotment Letter also contained a special buy back scheme (the Scheme ) whereby the Financial Creditor had the option to surrender the Flat either at the time of offer of possession or if the offer of possession was delaye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total cost of the Flat. The Corporate Debtor has breached the terms of the Allotment Letter by not permitting the Financial Creditor to enforce the Scheme. The Corporate Debtor has further defaulted by seeking to offer possession over one and a half years after possession was due. While the Corporate Debtor is defaulting, the Financial Creditor continues to pay pre-EMI interest of almost ₹ 30,000 per month to the Bank on the amount disbursed by the Bank. 12. In support of the claim the applicant has placed on record the following documents: * Copy of the allotment letter dated 20.10.2015. * Copy of Tripartite Agreement dated 17.09.2015. * Copies of e-mails exchanged between the parties. * Copy of Bank Account statement of applicant financial creditor with respect to the bank loan. 13. The Corporate Debtor has filed its reply and raised few objections against the admission of the present application. It is submitted that the petitioner had not made any payment since 15th November and therefore, interest of amount of ₹ 10,29,864/- is due and payable by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stipulated period. Being induced by the scheme and the representations of the Corporate Debtor, the Financial Creditor agreed to book the Flat. It is specifically denied that the Respondent acknowledged the delay in granting possession and stated that possession would be granted in December 2017. 18. We have heard learned counsel for the parties and have perused the case records including the counter-affidavit of Respondent. 19. The scheme of the Code provides for triggering the insolvency resolution process in respect of three categories of entities namely:- (a) Financial creditor (b) Operational creditor, and (c) Corporate Debtor itself. 20. The procedure in relation to the Initiation of Corporate Insolvency Resolution Process by the Financial Creditor is delineated under Section 7 of the Code, wherein only Financial Creditor / Financial Creditors can file an application. As per Section 7(1) of the Code an application could be maintained by a Financial Creditor either by itself or jointly with other Financial Creditors. Section 7 of the Code thus mandates that only the applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 (16 of 2016); (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) and (h) of this clause. 22. Clause (8) has been amended by the Insolvency and Bankruptcy (amendment) Ordinance, 2018, with effect from 6th June, 2018. In view of the revised definition, any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing and thus will come within the definition of Financial Debt under the Code. Definition of Financial Debt has been amended to specifically include dues of homebuyers. Amendment Act recognizes homebuyers as Financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor before the Adjudicating Authority when a default has occurred. Explanation. - For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the Corporate Debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as maybe prescribed. (3) The financial creditor shall, along with the application furnish- (a) record of the default recorded with the information utility or such other record or evidence of default as maybe specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as maybe specified by the Board. (4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the respondent after demand being raised. Therefore, it can be seen that the applicant itself has paid around ₹ 19 lac to respondent in terms of the agreement since the respondent itself has failed to give possession of flat within stipulated time the applicant is liable to get refund of amount with interest. 29. In the present case Financial debt is outstanding since the year 2017. The Corporate Debtor has not denied the claim of Petitioner and the amount of default exceeds much more than 1 lakh. In view of Section 4 of the Code, the moment default is Rupees one lakh or more, the petition to trigger Corporate Insolvency Resolution Process under the Code is maintainable. There is sufficient material on record to conclude that Respondent Corporate Debtor has committed default in repayment of the financial debt. 30. Under sub-section 5(a) of Section 7 of the code, the application filed by the applicant financial creditor has to be admitted on satisfaction that: 1. Default has occurred. 2. Application is complete, and 3. No disciplinary proceeding against the proposed IRP is pending. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor. 36. It is made clear that the provisions of moratorium shall not apply to transactions which might be notified by the Central Government or the supply of the essential goods or services to the Corporate Debtor as maybe specified, are not to be terminated or suspended or interrupted during the moratorium period. In addition, as per the Insolvency and Bankruptcy Code (Amendment) Act, 2018, which has come into force w.e.f. 06.06.2018, the provisions of moratorium shall not apply to the surety in a contract ..... X X X X Extracts X X X X X X X X Extracts X X X X
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